Science, Technology, and Innovation as Drivers of Development
December 15, 2014
The global middle class is expected to grow from 1.8 billion in 2009 to 4.9 billion by 2030. Much of this will occur in developing countries where 70 percent of global economic activity will emerge by 2050. However, with this growth comes increasing demand for energy, infrastructure, and consumer goods; Asia alone will require $8 trillion in infrastructure financing over the next decade to maintain current growth levels. Meanwhile, Africa is expected to hold the world’s fastest urban growth rate until 2050 but faces ongoing issues related to poverty and inequality.
Science, technology, and innovation have historically had an immense impact on “solving” the challenges that come with increased modernity and consumption. However, as globalization “scales up” today’s development challenges and official development assistance (ODA) dollars continue to fall, donor governments need to better identify, finance, and scale up science and technology-based approaches to meet these challenges. Donor agencies including the U.S. Agency for International Development (USAID) have long contributed to the creation and delivery of “game changing” technological products, particularly in the areas of health and food security. Today, advances in information communication technology (ICT) and greater access to finance have “democratized” innovation, empowering individuals, companies, and developing country governments to innovate and technological solutions can no longer be simply exported into developing countries. Instead, donors must leverage science and technology to build institutional and human capacity in developing countries and foster an enabling environment for future innovation, and ultimately economic growth.
A Role for Donors: Facilitating Partnerships
With the right mix of private sector and donor support, science and technology-based approaches to development could have significant economic impact. One such success is M-PESA, a mobile payment application developed by Vodafone subsidiary Safaricom with a £1 million starting fund from the United Kingdom’s Department for International Development (DFID) Financing Deepening Challenge Fund. The app has facilitated an average of $240 million per month in person to person transfers since 2009. Today, roughly two-thirds of Kenya’s adult population use M-PESA and around one-third of the country’s gross national product flow through it.
For donors, the M-PESA example illustrates the importance of working with the private sector to identify local needs and jointly support innovative ventures that meet these needs. Identifying and incubating efforts similar examples should be a donor priority not only because of the potential economic impact for developing contexts, but also the potential for reverse innovation --- when products originally developed for emerging markets are repackaged and used in the developed world.
Several OECD donors including the United States and Canada have recognized these new realities and have created programs to meet these needs. In 2011 USAID launched the Office of Science and Technology which as now evolved into the Global Development Lab, the initiative sought to harness the potential of science and technology to create game changing development programming that meet today’s needs. Its objectives include: launching a series of grand challenges for development to address audacious problems in development, expand the community of solvers and solutions, and catalyze global action; harnessing the resources, intellectual property and expertise of federal science agencies and academic institutions to advance development; and bolstering science and technology capabilities within the agency.
Today, the Lab promotes the use of science, technology, innovation and partnerships to help eradicate extreme poverty supporting innovations such as the Pratt Pouch a foil packet of antiretroviral medication that costs just 4 cents and can drastically reduce the transmission of HIV/AIDS from mother to child in areas where such drugs were once impossible to store properly. Related to this, USAID also partnered with DFID to create Global Development Innovation Ventures (GDIV) to leverage investments from private investors, philanthropists, corporations, and governments to scale up the best solutions to the world’s biggest development challenges, wherever those solutions may come from.
Canada’s Department of Foreign Affairs, Trade, and Development (DFATD) has also recognized the role of science and technology in development making it main pillar of its development programming. For example, the newly combined agency is working with the École Polytechnique de Montréal to establish the Institute for Training in Applied Solar Technology (IFTSA) at the University of Ouagadougou to train 600 technicians and engineers in the use of solar energy technology. The project seeks to leverage the expertise of the academic community to solve the dual problems of energy and environmental sustainability, all while passing on valuable technical and scientific expertise to workers in developing countries who can use the knowledge they acquire to contribute to development in their country long after the initial DFATD-led project concludes.
As part of these efforts, donors should also partner with the scientific and academic communities to create enabling environments for research and innovation, and build capacity in developing contexts. For example, the Toronto-based MaRS Discovery District, in partnership with DFATD, brings together individuals from the academic, corporate, and government to collaborate on solutions to development. The United States could partner with donors such as Canada in ramping up these efforts by expanding educational exchanges geared towards fostering and exporting scientific minds throughout the developing world; In 2001, 29,000 individuals participated in ECA exchanges, In 2010, the U.S. Department of States Bureau of Educational and Cultural Affairs (ECA) sponsored 57,801 exchange participants in a wide variety of programs, including science and technology.
Risk and Reward: A Role for DFIs
Despite broad recognition of the role of science and technology in development, both public and private actors face a common barrier to innovation: risk aversion. Donor governments, companies, and otherwise innovative individuals tend to avoid failure, and potential payoffs. To add, many tech solutions will often be delivered on primarily a for-profit basis. One way to encourage innovation is by leveraging development finance institutions (DFIs) such as the International Finance Corporation (IFC), European Bank for Reconstruction and Development, and the Overseas Private Investment Corporation (OPIC). These institutions share financial risk, provide loans, take equity investments, support emerging market equity funds, and provide advice to both companies and governments in the developing world. DFIs have a long history of working in environments where other investors refuse to operate due to outsized risk and are well-equipped to balance between risk and reward. DFIs are also well poised to fund costly science based approaches such as expanding access to wireless broadband access, a public good critical to growing economies, expanding access, and communication.
DFIs are particularly relevant in countries facing political and economic instability, and will become even more valuable as traditional aid spending starts to fall. Bangladesh now has 117.6 million mobile phone users, and Afghanistan has 21.6 million – both upwards of 70 percent of the population. Fifteen years ago there were essentially no cell users in either of these countries, yet a handful of entrepreneurs and investors in each decided they could create a telecom market in the heart of the developing world.
These examples illustrate that, even in the world’s most underdeveloped regions, there are significant opportunities for successful business, investment, and development, particularly in the science and technology sectors. Moreover, there is a role for DFIs to support similar efforts. However, as DFIs continue to struggle with prioritizing profits over development outcomes, donors must broker deals that balance profits and development outcomes and ensure that DFIs do not simply book low risk high return projects over locally developed solutions.
A Way Forward
Science and technology have been at the core of all major development advances in the last 50 years, but meeting tomorrow’s development challenges will require long term investments in both research and capacity building efforts to promote sustainable innovation in developing countries. In today’s world, innovation can no longer be exported. For donors, this means strategic partnerships with private sector, innovative financing, and a broad recognition of the ability of actors in developing country partners to innovate. Facilitating these efforts will be a boon for the United States, Canada and the rest of the world.
Daniel F. Runde holds the William A. Schreyer Chair in Global Analysis and directs the Project on Prosperity and Development at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Jeremiah Magpile is a Program Manager and Research Assistant with the CSIS Project on Prosperity and Development.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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